Almost 1,000 lives were saved because the NHS was subject to competition, a study by London School of Economics has found – sparking a war of words in the academic community over claims the research was "extremely flawed".

The paper, which was written by Dr Zack Cooper of the LSE and which was quoted by the prime minister last month, showed that where patients had more choice of hospitals they had lower death rates.

By comparing more and less competitive hospital markets before and after competition was introduced in 2006 under Labour, Cooper and his colleagues found that mortality rates of patients with heart disease fell more quickly in the more "competitive areas of England". Thus the academics estimate that the reforms led to approximately a 7% relative reduction in heart attack deaths in the NHS in England between 2006 and 2008 – around 900 fewer deaths.

The coalition has been keen to highlight the benefits of competition and choice in the NHS and has seized on research to bolster its pro-market reforms. Many academics who have been critical of this approach say that Cooper's work is "flawed".

Allyson Pollock, professor of public health research and policy at Queen Mary, University of London, said that "acute myocardial infarction (heart attacks) are not a measure of hospital performance". She said that many of the better outcomes for patients are due to better screening by GPs and a new non-surgical procedure that had been developed to open blocked heart arteries.

"This study is extremely flawed," said Pollock.

However, Cooper points out that heart attack patients were considered because hospitals improved all their services – and that his work had been peer-reviewed and published in the prestigious Economic Journal.

"Incentives cannot be a dirty word in the NHS. Creating financial incentives can save the NHS money and improve clinical quality," he said. "We find that competition between hospitals in a market with fixed prices led to very strong improvements in patient outcomes. Going forward, if the NHS is going to be successful, it can't shy away from competition."

The Co-operation and Competition Panel (CCP), the government body that investigates competition issues in the NHS, has found that patients are losing out as a result of restrictions on their choice of provider of NHS care.

An investigation found that nearly half the NHS primary care trusts were blocking competition by guaranteeing NHS providers set amounts of work before patients can be sent to the private sector, or restricting the number of services that private hospitals can offer at all.

The panel said that the expected benefits of patient choice – both to patients and taxpayers – will not be realised to their full potential and recommended that commissioners such as GPs would in the future have to explain why patients were not being offered alternatives to the NHS.

A Department of Health spokesman said: "This report highlights why we need to modernise the NHS, protect patients' rights to choice and increase transparency. Patients' rights to choice are enshrined within the NHS constitution. Under our plans to modernise the NHS we are extending choice for patients, giving them a louder voice, and making sure they are at the heart of our health system. We are also giving doctors and nurses the freedom to better tailor care for patients. The Department will consider the CCP's specific recommendations carefully to ensure that the benefits to patients of greater choice in their healthcare are realised."